Finding an Rx for Escalating Pharmacy Costs by Carving Out Benefits

Prescription drug spending is one of the most complex and fastest-growing aspects of the self-insured healthcare benefits plan, and it is essential that employer pharmacy benefits receive the same due diligence as medical benefits. However, for employers who have carved-in pharmacy benefits, the need to examine pharmacy costs and utilization is intensified.

In a carved-in arrangement, the same insurance carrier providing the medical benefit also holds the pharmacy contract with the Pharmacy Benefit Manager (PBM), meaning there is not a sole focus on pharmacy. As a result, carved-in plans face challenges around their lack of choice and control, limited visibility into contract terms, and ineffective reporting and analytics on their prescription drug trend.

By switching to a carved-out pharmacy benefit arrangement, employers can gain much-need control over their prescription drug spending and lower their overall benefits costs. See how we helped a growing municipality do exactly that.

The Challenge

With a $4 million pharmacy budget, a growing mountain city was facing an unrelenting escalation of their prescription drug costs. City leaders were looking for solutions that would control costs without transferring the burden to its 4,000 benefit plan members. Additionally, they had to ensure that any changes in benefits would not disrupt their plan members. It was important for them to provide uninterrupted access to maintenance and specialty drugs through both in-person and mail-order channels.


pharmacy budget

The Solution

RxBenefits, in partnership with the city’s selected brokerage firm, proposed a solution that would increase the city’s limited visibility into its specific pharmacy cost drivers and optimize its pharmacy contract for maximum savings and minimal member disruption.

  • Unbundle the pharmacy contract: By separating the pharmacy benefit plan from the medical benefit, the city would be able to manage its prescription drug costs independent of its medical carrier. The city would be free to contract with the pharmacy benefit manager (PBM) that it believed to be best aligned with the city’s objectives to lower costs while maintaining member access to essential medications.
  • Negotiate a competitive contract: As part of its carved-out arrangement, the city would benefit from a more competitive pharmacy contract. The city chose to partner with RxBenefits using an annual contract so that it could take advantage of annual pricing and improvements, optimized rebates, and performance guarantees at the client-level.

The Results

Overall Optimization Results:

RxBenefits’ independent PBM arrangement provided a more sustainable option for the city and generated significant savings to support its long-term benefit planning objectives. The city’s new carved-out pharmacy benefit helped set the stage for improved analytics and enhanced benefits communication efforts.


(30%) savings in pharmacy costs after a full year under a carved-out pharmacy contract


Download the Case Study

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